What is meant by the gamma of an option position

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1. What does it mean to assert that the theta of an option position is 0:1 when time is measured in years? If a trader feels that neither a stock price nor its implied volatility will change, what type of option position is appropriate?

2. What is meant by the gamma of an option position? What are the risks in the situation where the gamma of a position is highly negative and the delta is zero?

3. ‘‘The procedure for creating an option position synthetically is the reverse of the procedure for hedging the option position.'' Explain this statement.

Reference no: EM131237789

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